Comprehending the concept of tax credit is important for any by a first time house-buyer. With the passing of the recent legislation, people who are purchasing their homes for the first time are eligible for a tax credit worth more while the others who are buying their second or third houses are eligible for comparatively less credit.

For those who do not understand what tax credit is, here is the explanation for it. It is something that lessens your tax amount and enhances your tax refund. Until the year 2008, this credit amount was available as a loan with a low rate of interest, i. E., people had to pay the tax amount over a period of time, like the bank loans. Fortunately, this law was struck off the books with a new legislation that was passed in the year 2009. According to this new legislation, there is no need for you to pay the credit amount for as long as the purchased home is your primary residence for a minimum period of three years from the time you purchase it.

With this new legislation, all those who purchase new homes can apply for a tax rebate up to 10% of the purchase value of their house. Apart from that, in order to be eligible for this tax refund, you should make sure that you close the purchase deal of your house before 30th of June, 2010. Also, this house should be your primary residence, i. E., if you own a number of houses, then the one in which you reside for the maximum time becomes your primary residence.

Requirements

In order to be eligible for the tax credit, all those who are purchasing a home for the first time must fulfill the following requirements:

The purchaser should not have own another residence before this purchase, If he/she is married, then both the spouses have to fulfill this obligation.

The contract for the purchase of the home must be prepared before 30th of April and the complete deal must be closed prior to 30th June, 2010.

The value of the new house should not exceed a certain fixed amount.

The new home being purchased should belong to any relative or family friend. Finally, the purchaser must reside in the house for a minimum of three years after the purchase date to avail the tax rebate.

Advantages

With an upper limit being $8000, you can avail up to 10% of the purchase amount of the home you buy the first time.

People who had purchased their homes in the years 2009 or 2008 can avail the tax refund on their annual tax returns of the years 2008 and 2009.

For those working in the army and government services, this new law provides the benefit of an additional one year to avail your tax credit.

A separate law was passed for those buyers who own multiple houses. This law states that, in the previous eight years, if a person has been living in one home for more than five consecutive years, then he/she are eligible for a tax credit up to 10% of the cost price of their new home. However, the maximum limit is only $6500 and also, the price of the new house should not be more than the old house.

In conclusion, you should go understand the changes made in the tax legislation thoroughly for maximizing your tax credit while purchasing your new home.